Modesto may be in hot water over last year’s water rate increases

A Modesto city pump puts storm water from Village I into a canal owned by the Modesto Irrigation District, in December 2014.
A Modesto city pump puts storm water from Village I into a canal owned by the Modesto Irrigation District, in December 2014.

Did Modesto violate state law by hiding a secret storm water fee in last year’s steep water rate increase?

Yes, say two experts questioned separately about the strategy, which is costing 73,000 water customers in Modesto, Salida, Empire, Grayson, Del Rio and parts of Ceres and Turlock more than $1 million a year.

$1.2 million Yearly storm water component of Modesto’s 2016 fee increase

The move “appears to have been illegal,” attorney Timothy Bittle, Howard Jarvis Taxpayers Association’s director of legal affairs, said in an email. The association is a powerful anti-tax group.

“There should have been a (separate) vote on the storm drain fee,” agreed Redding attorney Walter McNeill, who specializes in suing government utilities for not following state law when they raise customers’ rates.

We believe there was adequate disclosure.

Adam Lindgren, Modesto city attorney

City Attorney Adam Lindgren defended Modesto’s procedure, saying, “We believe there was adequate disclosure.” But asked to show any wording about storm drainage in materials justifying the water price hike to voters, he couldn’t.

Proposition 218, passed by California voters in 1996, affords property owners a chance to weigh in when utilities want to raise rates. Governments must describe what a fee is for, why it needs to be raised and what the additional money will do.

Modesto did that for the water component of its 2016 increase. But no mention of the storm water component appeared in information sent to property owners. Neither did it surface when the Modesto City Council reviewed and approved the price hike last summer.

A storm water cost showed up in a consultant’s study justifying the water rate increase, but said nothing about a then-private plan to charge water customers for storm drainage, and to pass that money to the Modesto Irrigation District.

City staff’s focus at the time was on the water rate increase, acting Utilities Director Will Wong said this week. The water fund’s finances had taken a beating because of prolonged drought as the city’s water customers reduced consumption.

This is a unique gimmick, as far as I’m concerned.

Walter McNeill, attorney

The storm drain component came to light only two weeks ago, when the Modesto Irrigation District disclosed that it would begin collecting $1.2 million annually from the city, which pumps water into MID canals after it rains. MID had never charged for the service. The $1.2 million is about 11 percent of the extra $10.8 million that the water rate increase is expected to bring in this year.

Cities and counties can raise water, sewer or garbage rates if a majority of customers don’t object. Most increases pass because typically, few people protest. It’s a different story for storm water. In order for an increase to pass, most property owners must vote for it – a difficult threshold for local governments.

Such efforts failed, for example, when Stanislaus County tried last year to persuade Empire property owners to tax themselves $85 a year for better sidewalks and storm drains. People in Grayson rejected a similar vote in 2010, and property owners in the Bangs Industrial Park east of Modesto’s McHenry Avenue turned down storm drains in 2011.

Modesto got around the problem by quietly rolling the storm water fee into the water rate increase last year. The rationale is that the storm water fee helps Modesto protect its groundwater supply by keeping contaminated storm water from seeping into aquifers, Lindgren and Wong said.

We are viewing it as an economical way to ensure we have clean groundwater for our water customers.

Will Wong, acting utilities director, Modesto

“We are viewing (the canal fee) as an economical way to ensure we have clean groundwater for our water customers,” Wong said.

McNeill called Modesto’s strategy “mixing apples and oranges, improperly and illegally.”

“You can’t conflate the two in one vote,” he said. “Whether (the agreement with MID) is a good deal, wise or unwise, is not the point. (A storm drain charge) is the type of property-related fee people are entitled to vote on.”

When Salinas tried a similar approach – establishing a storm water fee without asking voters – the Howard Jarvis Taxpayers Association sued, and won in appellate court in 2002.

Lindgren said, “The city believes its actions last year were in compliance with Prop. 218.” Asked how that could be, when voters knew nothing of the storm water component, he pointed to a staff report – prepared for this week’s council meeting.

The council on Tuesday was poised to ratify the agreement with MID, reached privately long ago. Although the matter appeared on Tuesday’s agenda, it was removed at the last minute. Council members had questions, and city officials expect to brief them individually before bringing the agreement back at a future meeting.

State law does allow cities to legally avoid separate voter approval for storm water fees if reclaimed rainwater is put to beneficial use – recycling it, selling it to farmers or putting it in the ground to boost aquifers. Former Utilities Director Larry Parlin two weeks ago said Modesto hopes someday to pursue such projects. But for now, the storm water is dumped into MID canals, where it flows to the river and eventually out to the ocean.

The city claims that the beneficial-use loophole should apply. In addition to canals carrying away rainwater, Modesto relies on numerous rock wells, or deep wells filled with rocks, to capture water after storms, allowing it to seep into the ground. City crews maintaining rock wells prevent dirty storm water from contaminating the aquifer, the theory goes. The city’s attorneys approved the nexus, Wong said.

“That’s a convoluted excuse and not really a valid rationale,” McNeill said. “One (disposal) method doesn’t change the nature of the storm water. It’s storm water. The rationale that there is some collateral benefit to groundwater is specious.

“You find unique twists on things that municipalities try to do to evade Prop. 218 requirements,” McNeill continued. “This is a unique gimmick, as far as I’m concerned.”

Sounds like a convenient thing to say as a post-hoc rationalization for not holding an election.

Timothy Bittle, Howard Jarvis Taxpayers Association

Bittle agreed. “It seems pretty far-fetched that storm water naturally percolating through 40 to 50 feet of earth would pollute groundwater. Sounds like a convenient thing to say as a post-hoc rationalization for not holding an election,” he said.

It might be different, Bittle said, if city officials had done specific scientific studies backing up the claim. They haven’t.

Last year, City Hall said a typical family’s monthly water bill would jump from $42 to $54 under the new rate, an increase of nearly 30 percent to be followed by others that could bring the same family’s bill to $71 in several years. The City Council must revisit rate proposals each year.

Meanwhile, legislation pending in Sacramento – Senate Bill 231 – would allow cities and counties to raise storm water fees the same way they do rates for water, sewer and garbage. It’s not clear whether the bill has support from enough legislators to pass, Bittle said.

Garth Stapley: 209-578-2390 Kevin Valine: 209-578-2316